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ITC: The Big strider

We visited ITC PSPD at their Secunderabad office to gain insights into the business philosophy and growth strategy. Since its inception, ITC PSPD has successfully grown to become a 530000 TPA, globally recognized manufacturer of paperboards and specialty papers – which reflects in the worldwide demand for its cutting-edge products.

Left-Right: Mr. Niraj Shrivastava, Mr. Pradeep Dhobale, Mr. S.N. VenkataramanITC has built its reputation on a commitment of providing quality products and value-added services while rapidly responding to domestic and international needs for high performance products – helping customers to increase productivity and profitability. A primary strategy is enhanced customer intimacy. ITC constantly analyzes the needs of key customer segments around the world to develop a wide range of products for business, industry, and educational uses.

ITC has always placed the nation at the heart of its priorities. It has been proactive in managing environmental issues. Today, ITC continues to lead the market with sustainable product offerings and is the leader in eco-responsible products spanning both virgin and recycled grades of paper and paperboards.

Corporate Overview

ITC Limited, a 5 billion dollar diversified conglomerate operates in 4 main business areas mainly FMCG, Printing and Packaging, Agri-business and Hotels. In addition, ITC has two subsidiaries ITC InfoTech India Ltd, a 100 million USD company concentrating on high-end IT solutions, and Wimco Ltd. – a manufacturer and marketer of safety matches.

The Paperboards, Paper and Packaging businesses, comprising the Paperboards and Specialty Papers Division and the Printing and Packaging Division, account for a gross turnover of more than Rs. 2800 crores in the year 2008-09.

Under the FMCG umbrella, Cigarette business is the largest, with brands like Insignia, India Kings, Classic and Gold Flake. Branded Foods is the second largest, with brands like Aashirvaad, Sunfeast and Bingo, followed by Lifestyle Retailing with the Wills Lifestyle, John Players and Miss Players brands. The Personal Care portfolio boasts of brands like Fiama Di Wills, Vivel, etc. ITC also operates in other FMCG business like Agarbattis with Mangaldeep, and Educational and Stationery Products with Classmate and Paperkraft.

Strategic Intent:

Ist Approach- Customer oriented Focus

PSPD’s insights, drawn from close customer interactions, help it to develop innovative products. The traditional approach of papermakers is that they produce paper and supply papers to different industry segments. But PSPD’s approach is different. Through frequent interactions with the trade and the market, PSPD understands the different segments or applications and identifies the needs of this segment. These needs are then addressed through customized products. Take the Playing Card segment for example. By analyzing the preferences and special requirements of this industry from printing, die-cutting and finishing up to usage of the product by the card players, PSPD developed a specific product to meet these needs. They also carry out a value analysis and assess the critical components of value to the end user, to the brand owner, to the printer/converter and uncover the gaps in the existing market offerings. The entire focus is on meeting the customer value chain requirements and the product with added services is designed around this concept. Likewise, there are a few customers with whom PSPD has developed the product together (co- created) to meet customer specific requirements - like Tetra Pak for liquid packaging boards.

IInd Approach: Sustainability Plank

ITC PSPD is also the leader on the sustainability and eco-friendly planks. They have positioned themselves on a very high deck, and are setting a benchmark for the Indian Paper Industry. ITC PSPD implemented ECF technology 7-8 years ahead of legislation, and has now progressed to an even more advanced Light ECF(with ozone bleaching) technology.

Climate change is an important consideration for ITC and the environmental footprint of its businesses is a key focus area. ITC PSPD ensures that its operations consume lower energy per ton of paper/boards and increasingly uses more biofuels. ITC PSPD is also the leader in clonal technology and plantations in India having pioneered the same as early as 1990. ITC PSPD is growing trees beyond their wood requirement – having already covered over 100,000 hectares. These plantation activities help ITC as a whole become a carbon positive organization – sequestering more CO2 than they emit.

Future expansions

Even during the economic slowdown, paper consumption in India hasn’t come down. It has grown though at a comparatively lower rate. Today, the growth rate is around 5-6%p.a. While when the economy was booming, the paper industry grew at 10% p.a.

At present, the production is 10 million ton (approx). Considering the average growth rate of 8% p.a., the Indian market would require additional production of 800,000 ton every year. So certainly ITC is looking at enhancing capacities informed Mr. Dhobale.

As of now they have projects of around Rs 4000 crores in the pipeline scheduled for next 2-5 years. The only limitation to their growth plans is the availability of the land, as their flagship location Bhadrachalam is almost saturated for an integrated project. The expected allocation of this investment would be in the high growth segments i.e. Packaging Paperboard, Paper grades like Copier Paper and Digital Printing with a planned capacity of 3 lac tons and would be an integrated facility with a new Pulp Mill but the Paper/Board Machine could be a second hand one meeting their requirements as they have the expertise to upgrade second-hand machines to their requirement.

Wealth Out of Waste

This latest PSPD initiative has just begun by collecting waste paper from household, offices etc. At present the collection is around 3000 TPM of waste paper and this could become a separate line of business in the future. Traditionally, rag pickers collect, segregate and supply waste paper to the trade etc. PSPD is working to make them more efficient. They provide them tricycles to which they can attach different bags and bins. They have also made central collection points to minimize the travel time. This activity creates an economic surplus which benefits the mill because this will ensure indigenous availability of raw material which will reduce imports. With this ITC is creating employment and reducing the problems like solid waste disposal.

Triple bottom-line approach

All the businesses of ITC are internally evaluated on the triple bottom line approach. “We not only have to produce surplus for our stakeholders which means our financial profits but we also need to have positive environment and social footprint” states Mr Pradeep Dhobale the Chief Executive.

ITC not only creates economic surplus and addresses climate change through activities like plantations and energy efficient operations, but also through the WOW initiative creates jobs at the bottom of the pyramid – a social benefit. ITC mill

Mantra of success

ITC is a transparent and employee-centric organization. There is an environment of friendliness rather than superior-subordinate relationship. At a corporate level, constant support is provided by the Board of Directors and the Management Committees as it is a very capital intensive business. ITC PSPD constantly benchmarks its performance against Indian as well as overseas companies on different parameters. They were among the top 10 paper companies in India five years ago but today taking the Paper, Paperboard and Packaging together ITC is probably the number one in India.

Art of motivation

At ITC, people are provided with space to perform, set objectives and allot required resources. There is complete freedom of execution and strategy formulation, as the people are directed towards result oriented performance. Training of resources is the highest priority. Middle and senior managers at ITC get stock options i.e. shares depending on some proportion, which is all performance linked. ITC provides a healthy workplace environment which fosters creativity and initiative with performance and accountability.

ITC has a lot of in-house management programs. Identified managers are routinely exposed to customized training programs devised by IIMs and ISB. Internal training programs conducted by the Corporate and Divisional HR like the MDP (management development programs) ensure that employees and managers are upto date on skill levels with their global contemporaries.

Challenges for the Indian paper industry

Talent management is very important for the industry. As Mills upgrade their production facilities by commissioning additional machines they will need a skilled workforce to make quality products and attain efficiencies. While the industry is working a lot in areas of technological advancements and commercial issues, not enough has been done for talent management.

With the non-availability of fresh talent, senior managers are stretching their work span, considerably, and average age at this level is going up.

With growth rate expected to be around 8%-10% for the coming decade, raw material availability will also be of great concern and will need bold initiatives between Government and Industry to harness wastelands and induct biotechnology to meet fibre requirements.

Sustainable development needs will have to be met and the industry will have to invest in energy-efficient operations and develop the right footprint in terms of carbon emissions, AOX and BOD/COD signatures, water usage and meet increasingly stringent legislative requirements relating to food safety and hygiene norms.

ITC’s:

Pioneers in the ECF technology and Ozone bleaching treatment.

Installed NCG (non condensable gas burning), to get rid of the foul smell from pulping operations MBBR technology for the water treatment.

High level automation for defect free products.

Competent and trained manpower resources with global exposure.

High degree of sensitivity to customer requirements and customer satisfaction.

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1 Star2 Stars3 Stars4 Stars5 Stars (3 votes, average: 4.33 out of 5)
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